R.I. hotel developer cites rising construction costs

Friday

May 19, 2017 at 7:35 PMMay 19, 2017 at 7:35 PM

In the face of rising construction costs, the Cranston-based Procaccianti Group is seeking additional financial incentives from the Rhode Island Commerce Corporation for the extended-stay Marriott Residence Inn the company intends to build at the site of the former John E. Fogarty Building on Fountain Street.

Kate Bramson Journal Staff Writer journalkate

PROVIDENCE, R.I. — In the face of rising construction costs, the Cranston-based Procaccianti Group is seeking additional financial incentives from the Rhode Island Commerce Corporation for the extended-stay Marriott Residence Inn the company intends to build at the site of the former John E. Fogarty Building on Fountain Street.

Those credits include Rebuild Rhode Island tax credits worth $100,000 and $1.3 million in sales-tax rebates for construction materials, Sheaff said. Plus, it includes $6 million under a tax-increment financing program that will give a portion of the taxes generated by the hotel to the developer for help paying down a loan for the construction project, Commerce Corporation Managing Director Jesse Saglio said.

That's one of three incentives packages the committee voted to recommend for approval to the full Commerce Corporation board at its Monday night meeting. In all, the corporation is poised to consider tax credits and other financial incentives for three business projects that could total more than $13.6 million.

Regarding the Marriott, Commerce Corporation President Darin Early discussed with the committee how the Commerce team has begun to hear from developers and see evidence that construction costs are rising in the region.

“We are seeing across the marketplace upward pricing pressure on construction costs,” Early said in an interview after the meeting. “And the gap that exists within the proposal [for the hotel project] reflects that upward pressure.”

When the Procaccianti team initially began seeking city approvals from the Providence City Council to demolish the Fogarty building and build the Marriott, the company estimated construction costs for a 150-room hotel to be $40 million. Details shared with the Commerce investment committee Friday indicate the project is now expected to cost $60 million and include 176 rooms.

A company representative did not attend the committee meeting, and calls and emails to a Procaccianti executive Friday seeking details about why the project is now larger were not returned by deadline.

In January 2016, the Commerce Corporation approved a city request to reimburse Providence up to $246,597 of the revenue it would forgo if the city gave the developer a tax-stabilization agreement. The city gave the developer a 12-year agreement that freezes property taxes for three years and then raises them incrementally, expected to save the developer about $2.5 million.

Vistaprint moving into Rhode Island

The committee also approved Qualified Jobs tax credits of at least $2.2 million for Vistaprint, the Massachusetts-based company that announced plans earlier this week to open this summer a new national sales office in Providence for its Vistaprint Corporate Solutions division and employ at least 125 workers there within three years. The president of the company that prints business cards and promotional materials told reporters Wednesday that lower costs here in Rhode Island were why it did not expand at its offices in Waltham. If the company hires even more employees, it can get more tax credits.

Commerce board members and investment committee members Michael McNally and Bernard V Buonanno III discussed news reports that the company's location here might affect another national e-commerce custom printer in Rhode Island, Moo Inc., which has offices in Lincoln. Early said the company's location search had been competitive.

McNally noted the same tax credits tied to new jobs are available to local companies, not just firms moving into the state: "If Moo were expanding, they could get them, too."

New apartments

Also Friday, a $56.9-million apartment project at 169 Canal St., in Providence, won the committee's approval for $4 million in credits, including $3 million in Rebuild Rhode Island tax credits and $1 million in sales-tax rebates for construction materials. As the Pennsylvania-based Vision Properties prepares to build units intended as student residences, Saglio told the committee the building is expected to match the nearby Citizens Bank headquarters building in height.

The Rebuild program awards tax credits to developers once a building gets a certificate of occupancy, and the Qualified Jobs program awards tax credits once employees have worked here a year and paid personal income taxes.